Aug 13, 2015 ... •Basic petroleum economics. ▫ Trends for crude oil & gasoline prices. ▫ When do
refiners make money? •Generalized Petroleum Refinery. 2 ...
Petroleum Refining Overview
Topics Energy consumption & petroleum’s place Size of U.S. industry Major refiners
Petroleum products Basic petroleum economics Trends for crude oil & gasoline prices When do refiners make money?
Generalized Petroleum Refinery
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Energy consumption in the U.S. & petroleum’s contribution
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Energy Markets Are Interconnected
https://flowcharts.llnl.gov/commodities/energy
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Energy Markets Are Interconnected
https://flowcharts.llnl.gov/commodities/energy
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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World & U.S. Refining Capacity
“Asia‐Pacific refining primed for capacity growth”, Oil & Gas Journal, pp 34‐45, Dec. 1, 2014
EIA, Jan. 1, 2017 database, published June 2017 http://www.eia.gov/petroleum/refinerycapacity/
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Number & Capacity of World & U.S. Refineries
“Asia‐Pacific refining primed for capacity growth”, Oil & Gas Journal, pp 34‐45, Dec. 1, 2014 Source: EIA, Jan. 1, 2016 database, published June 2016 http://tonto.eia.doe.gov/dnav/pet/pet_pnp_cap1_dcu_nus_a.htm
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Locations of U.S. Refineries
http://www.eia.gov/todayinenergy/detail.cfm?id=7170
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Individual U.S. Refinery Sizes – 10 Largest & 10 Smallest
EIA, Jan. 1, 2017 database, published June 2017 http://www.eia.gov/petroleum/refinerycapacity/
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World’s Largest Refineries
“Asia‐Pacific refining primed for capacity growth”, Oil & Gas Journal, pp 34‐45, Dec. 1, 2014
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Recent changes to the slate of US refineries Motiva completed $10 billion JV expansion in 2013 Increased to 600,000 bpd capacity, now largest in US • Operating problems caused near immediate shut down of new crude distillation train
Plan to export refined products
Changes in operations Tesoro to shut down Carson, CA’s FCCU in 2017 & integrate into adjacent Wilmington refinery
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Changes in ownership PBF Energy purchased two ExxonMobil refineries • Chalmette, LA, 189,00 bpd refinery (from ExxonMobil / PdVSA, November 2015) • Torrance, CA, 155,00 bpd refinery (June 2016)
Tesoro buying Dakota Prairie Refining (June 2016) Par Pacific Holdings purchased Wyoming Refining Co (July 2016) Tesoro bought Western Refining (June 2017) & will be known as Andeavor (August 2017)
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New Grass‐Roots Refineries in U.S.? Year Built
First Operated
Location
Original Owner
Original Capacity Current Owner Bbl/cd
2014 Capacity Type Bbl/cd
2014
2015
Dickinson, ND
Dakota Prairie
19,000
Dakota Prairie Refining
19,000
Simple
2014 2008 1998 1993 1991 1986 1985 1981 1979 1978 1978 1978 1977 1976 1976 1975
2015 2008 1998 1993 1992 1987 1986 1982 1980 1979 1979 1978 1978 1977 1977 1975
Galena Park, TX Douglas, WY Atmore, AL Valdez, AK Ely, NV North Pole, AK Prudhoe Bay, AK Thomas, OK Wilmington, CA Vicksburg, MS North Slope, AK North Pole, AK Lake Charles, LA Garyville, LA Krotz Springs, LA Corpus Christi, TX
Kinder Morgan Interline Resources Goodway Petro Star Petro Source Petro Star ARCO OK Refining Huntway Ergon ARCO Earth Resources Calcasieu Marathon Gold King Saber
43,000 3,000 4,100 26,300 7,000 6,700 12,000 10,700 5,400 10,000 13,000 22,600 6,500 200,000 5,000 15,000
Kinder Morgan Antelope Refining Goodway Petro Star Foreland Petro Star ConocoPhillips Ventura Valero Ergon BP Exp AK Flint Hills Calcasieu Marathon Alon Valero
43,000 3,800 4,100 55,000 2,000 19,700 15,000 12,000 6,300 23,000 10,500 126,535 78,000 522,000 80,000 200,000
Simple Simple Simple Simple Simple Simple Simple Simple Simple Simple Simple Simple Simple Complex Complex Complex
http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6, updated January 26, 2016
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New Grass‐Roots Refineries in U.S.? Simple refineries near oil production Kinder Morgan, Galena Park, TX – 50,000 bpd (condensate splitter) Dakota Prairie Refinery – 20,000 bpd Bakken crude topping unit with diesel hydrotreating MHA Clean Fuels Refinery, 15,000 bpd refinery on the Fort Berthold Indian Reservation near Makoti, ND • Ground broken May 2013. Phase I construction underway as of May 2015.
Plans near Bakken production
Complex refineries – 2 planned in mid 2000s no longer active projects Hyperion Energy Center, $10 billion, 400,000 bpd refinery near Union County, SD • Would have included Petcoke IGCC for power & hydrogen • Air permit applications expired March 2013 & released options on land May 2013
Arizona Clean Fuels Yuma, LLC, 150,000 bpd refinery near Yuma, AZ • No press releases since March 2009
• Quantum Energy & Native Son Holdings planning 40,000 bpd refinery near Berthold, ND • Meridian Energy Group planning 55,000 bpd refinery near Belfield, ND – expected 2018 startup – may operate on midstream tolling concept Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Nelson’s Complexity Factor EDC: Equivalent Distillation Capacity Measure of downstream conversion capacity to the initial distillation Developed by Nelson (1960) to quantify relative costs of refining processes • Reflects complexity of ISBL, no OSBL considerations
Refineries to process heavy sour crudes typically have higher complexity factors
Ref: http://www.ril.com/downloads/pdf/business_petroleum_refiningmktg_lc_ncf.pdf
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Petroleum products
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Petroleum Products There are specifications for over 2,000 individual refinery products Intermediate feedstocks can be routed to various units to produce different blend stocks • Highly dependent on economics specific to that refinery & contractual limitations
Ref: Unknown origin. Possibly Socony‐Vacuum Oil Company, Inc. (1943)
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U.S. Refinery & Blender Net Production
1.6 ratio of gasoline & naphtha to middle distillates
EIA, refinery yield – updated April 7, 2017 http://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_m.htm
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Basic petroleum economics
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Refinery Economics When do refiners make money? High crude oil prices? Low crude oil prices?
It depends! Difference between the sale price of the products & purchase price of the crude oil Operating costs cut into this spread
Typical prices What is the price of crude oil? • Depends on location, quality, …
What are the product prices?
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Product Economics — Crack Spread Estimates the value added by refining as an industry 4 standard spreads 5‐3‐2 • 5 bbl crude 3 bbls gasoline + 2 bbls heating oil/diesel
3‐2‐1 • 3 bbl crude 2 bbls gasoline + 1 bbls heating oil/diesel
2‐1‐1 • 2 bbl crude 1 bbls gasoline + 1 bbls heating oil/diesel
6‐3‐2‐1 • 6 bbl crude 3 bbls gasoline + 2 bbls heating oil/diesel + 1 bbl residual fuel oil
Rule of thumb for profitable operating environment Long held view – greater than $4 per bbl as strongly profitable Current view – should be greater than $9 per bbl to be profitable
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Crack Spread Calculation Example — Bloomberg, 7/5/2017 Prices • WTI Cushing Spot • Brent • RBOB Gasoline • Heating Oil
$45.39 per bbl $48.08 per bbl $1.5121 per gal $1.4851 per gal
5‐3‐2 Spreads • WTI: 42 3 1.5121 2 1.4851 45.39 $17.66 per bbl 5
• Brent: 42 3 1.5121 2 1.4851 48.08 $14.97 per bbl 5
http://www.bloomberg.com/energy/
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Prices Are Crude Specific
Ref: Statistics, Oil & Gas Journal, April 10, 2017
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Prices Are Crude Specific
EIA published monthly production data – updated July 5, 2017 http://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm http://tonto.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=IMX2810004&f=M
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Historical Crude Prices & Crack Spreads
Updated April 7, 2017 Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
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Historical Crude Prices & Crack Spreads
Updated April 7, 2017 Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Gasoline & Diesel Retail vs. Wholesale Prices Retail Price
Gasoline Retail Cost Contributions Per Gallon Per Barrel $2.39 $100.38
Taxes Distribution & Marketing Refining Crude Oil
19% 17% 16% 48%
Refinery Costs / Wholesale Price
Retail Price
$0.45 $0.41 $0.38 $1.15
$19.07 $17.06 $16.06 $48.18
$1.53
$64.24
Diesel Retail Cost Contributions Per Gallon Per Barrel $2.56 $107.52
Taxes Distribution & Marketing Refining Crude Oil
20% 21% 14% 45%
Refinery Costs / Wholesale Price
$0.51 $0.54 $0.36 $1.15
$21.50 $22.58 $15.05 $48.38
$1.51
$63.44
Source: http://www.eia.gov/petroleum/gasdiesel/ Updated July 5, 2017
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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How do energy prices compare?
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Generalized Petroleum Refinery
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Early History Commerical oil well of "Colonel" Edwin L. Drake August 1859, Oil Creek in northwestern Pennsylvania First refineries built up around Pennsylvania oil wells. Batch distillation to recover kerosene. • First U.S. refinery in Pittsburgh, PA, in 1853 • Kerosene viewed as a superior replacement to whale oil for lamp oil.
Standard Oil Trust John D. Rockefeller acquired petroleum interests during the late 1800s. Organized as the Standard Oil Trust in 1882. U.S. Supreme Court dissolved in 1911. 34 companies spun off.
Change in product demand In 1911, nation's kerosene output eclipsed for the 1st time by a discarded byproduct ‐ gasoline
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Implementation of Technologies Year 1862
Process name Atmospheric distillation
1870
Vacuum distillation
1913 1916 1930 1932 1932 1933 1935 1935 1937 1939 1940 1940 1942 1950 1952 1954 1956 1957 1960 1974 1975
Thermal cracking Sweetening Thermal reforming Hydrogenation Coking Solvent extraction Solvent dewaxing Cat. polymerization Catalytic cracking Visbreaking Alkylation Isomerization Fluid catalytic cracking Deasphalting Catalytic reforming Hydrodesulfurization Inhibitor sweetening Catalytic isomerization Hydrocracking Catalytic dewaxing Residual hydrocracking
Purpose Produce kerosene Lubricants (original) Cracking feedstocks (1930's) Increase gasoline Reduce sulfur & odor Improve octane number Remove sulfur Produce gasoline basestocks Improve lubricant viscosity index Improve pour point Improve gasoline yield & octane number Higher octane gasoline Reduce viscosity Increase gasoline octane & yield Produce alkylation feedstock Increase gasoline yield & octane Increase cracking feedstock Convert low‐quality naphtha Remove sulfur Remove mercaptan Convert to molecules with high octane number Improve quality and reduce sulfur Improve pour point Increase gasoline yield from residual
By‐products, etc. Naphtha, tar, etc. Asphalt, residual coker feedstocks Residual, bunker fuel Sulfur Residual Sulfur Coke Aromatics Waxes Petrochemical feedstocks Petrochemical feedstocks Increased distillate, tar High‐octane aviation gasoline Naphtha Petrochemical feedstocks Asphalt Aromatics Sulfur Disulfides Alkylation feedstocks Alkylation feedstocks Wax Heavy residuals
Ref: http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html
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Description of Petroleum Refinery Manages hydrocarbon molecules Organized & coordinated arrangement of manufacturing processes Provide physical & chemical change of crude oil Salable products with specifications & volumes as demanded by the marketplace
Complete refinery will include: Conversion units Tankage for storage • Typically 28 to 32 days of storage
Dependable source for electric power Waste disposal & treatment facilities Product blending facilities Around the clock operations
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Petroleum Refinery Block Flow Diagram
Raw Materials
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Products
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Petroleum Refinery Block Flow Diagram Gases
Sulfur Plant
Polymerization Sat Gas Plant
Gas
LPG
Fuel Gas
Alkyl Feed
Gas Separation & Stabilizer
Sulfur
LPG
Butanes
Alkylation
Isomerization
Polymerization Naphtha
Light Naphtha Alkylate
Aviation Gasoline Automotive Gasoline
Isomerate
Reformate
Naphtha Hydrotreating
Heavy Naphtha
Solvents
Naphtha Reforming
Naphtha
Atmospheric Distillation Jet Fuels Crude Oil
Kerosene
Desalter
Cat Naphtha
Distillate
AGO
Hydrocracking
LVGO
Kerosene
Fluidized Catalytic Cracking
Gas Oil Hydrotreating
Vacuum Distillation
Solvents
Distillate Hydrotreating
Treating & Blending
Heating Oils Diesel
Cat Distillates
Fuel Oil Cycle Oils
HVGO
Residual Fuel Oils
DAO
Solvent Deasphalting
Visbreaking Vacuum Residuum
Coker Naphtha
Heavy Coker Gas Oil
SDA Bottoms
Naphtha
Asphalts
Distillates Fuel Oil Bottoms Lube Oil
Solvent Dewaxing
Lubricant Greases Waxes
Waxes
Coking
Light Coker Gas Oil
Coke
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Summary
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Summary Energy consumption in the U.S. & petroleum’s contribution In the U.S. petroleum accounts for 36% of the nation’s energy source Over 70% of petroleum is directed toward the transportation sector & accounts for 90% of the energy used in this sector Currently about 150 refineries in the U.S. & ownership changes to meet strategic needs of the companies’ portfolios About 50% of the output of U.S. refineries is gasoline
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Basic refining economics Refinery profits are based on the spread between product prices & crude oil costs
Generalized Petroleum Refinery Refineries may be simple or complex depending on the strategy of product production from particular crude oils
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Supplemental Slides
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Refiner’s Realignment
“US refiners continue consolidation, restructuring efforts”, Leffler, Oil & Gas Journal, Aug. 3, 2015
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Recent Refinery Closures
Ref: Valero, UBS Global Oil and Gas Conference, May 21‐22, 2013
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U.S. Refinery & Blender Net Production
Includes production to January 2017 – updated April 7, 2017 Source: http://tonto.eia.doe.gov/dnav/pet/pet_pnp_refp_dc_nus_mbbl_m.htm
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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U.S. Oil from Imports
EIA published data used for charts – updated April 7, 2017 http://www.eia.gov/dnav/pet/pet_move_wkly_dc_nus‐z00_mbblpd_w.htm http://www.eia.gov/dnav/pet/pet_pnp_wiup_dcu_nus_w.htm
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Import/Export Refined Products – Valero Example
Ref: Valero, UBS Global Oil and Gas Conference, May 21‐22, 2013
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Prices Are Crude Specific – Historical Example
Ref: Statistics, Oil & Gas Journal, January 27, 2014
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Pump prices are not the same across U.S.
Source: http://www.eia.gov/petroleum/images/gasoline_prices_map_375.png Downloaded August 4, 2016
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Gasoline & Diesel Taxes not the same across U.S.
Source: http://www.api.org/oil‐and‐natural‐gas‐overview/industry‐economics/fuel‐taxes Downloaded July 5, 2017
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Differential Between Regular & Premium Gasolines
Updated Jul 5, 2017 Source: http://www.eia.gov/dnav/pet/pet_pri_refmg_dcu_nus_m.htm
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Comparison Wholesale Regular Gasoline & ULSD
Updated August 4, 2016 Source: http://www.eia.gov/dnav/pet/pet_pri_refmg_dcu_nus_m.htm
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Process Cost Estimates Accounts for size impact on installed cost Developed from reported final costs & supplemented with engineering estimates Meant to represent “typical” values – no better than ±25% Not included:
Working capital Inventories Start‐up expenses Cost of land Site preparation Taxes Licenses Permits Duties
Kaiser & Gary, “Study updates refinery investment cost curves”, Oil & Gas Journal, Apr. 23, 2007, pp 84‐94. (Delayed coking curves may have been switched)
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Satellite View of Selected U.S. Refineries
Dakota Prairie Refinery, Dickinson, ND 19,000 bbl per calendar day
Motiva Enterprises LLC, Port Arthur, TX 603,000 bbl per calendar day Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Satellite View of Selected U.S. Refineries
Marathon Garyville Refinery, Garyville, LA 451,000 bbl per calendar day
Updated: July 5, 2017 Copyright © 2017 John Jechura (
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Wood River Refinery, Roxanna, IL 336,000 bbl per calendar day
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Satellite View of Selected U.S. Refineries
Suncor Refinery, Commerce City, CO 103,000 bbl per calendar day
Phillips 66 Alliance Refinery, Belle Chasse, LA 247,000 bbl per calendar day
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